Prerequisites:

Overview:

Following are the brief steps involved in budget control configuration for purchase orders.

Dimensions for budget control

Budget cycles

Budget models

Budget control configuration

Budget control dimensions

Over budget permissions

Budget funds available

Document and journals

Assign budget models

Define budget control rules

Activate budget control configuration

Budget register entry

Budget control statistics

Perform budget check on purchase orders

Steps:

Detailed steps can be found below.

Dimensions for budgeting

Budgeting > Setup > Basic budgeting > Dimensions for budgeting
First, we need to select which dimensions in the ledger will be available for budgeting. Select and move all the needed ones to the Budget Dimension pane.

Budget models

Budget cycles

Budget control configuration

Budgeting > Setup > Budget control > Budget control configuration
In budget control configuration, we need to define which ledger account structure and dimensions will be used for budgeting. Select and move all the required dimensions to the Budget Control Dimensions pane. These dimensions are coming from Dimensions for budgeting setup.
Configure any over budget permissions if needed. It gives you a provision to configure a group of users which will be allowed to do over-budget purchases with a warning message.
This screen allows you to configure the method to calculate budget funds available.
Choose the documents and journals you want to be under budget control.
Assign budget models.
Define budget control rules. This screen gives you more control over which main accounts or financial dimensions need to be under budget control.
The following screens were skipped as they were not required in my scenario.

Select main accounts – Needed only if main account is not selected as budget control dimension

Budget register entry

Budgeting > Budget register entries
Once the setups are complete, we are ready to raise a budget register entry to allocate funds to a combination of financial dimensions. In the following example, we are allocating budget to a main account 618900 which is a Miscellaneous Expenses account along with the required budget control dimensions. Then click update budget balances which will change the status to Completed.
Tip:
Please note if you do not include all the budget control dimensions in this entry, system will NOT show the green icon under budget check results

Budget control statistics

Budgeting > Inquiries and reports > Budget control > Budget control statistics
To validate budget register entry has taken effect, you can see the funds available for your dimension values under budget control statistics. If couldn’t any entry for budget funds for your dimension combination it means something is wrong with the budget register entry.

Budget in action on purchase orders

Once the setups are in place, raise a purchase order and make sure to add a line item which has the same main account and financial dimensions for which budget funds have been allocated via budget register entry. In the posting profile, main account 618900 is configured for all items and procurement categories except item 1000 and Rent, Advertising, Utilities and Commissions and rebates.
Selecting Corp Procurement Categories as the line item.
Make sure financial dimensions are correct on the line item.
As you can see below the ledger account string shows the same main account and financial dimensions for which budget funds have been allocated:
Perform budget check on the purchase order by clicking:
Purchase > Manage > Budget > Budget > Perform budget checking
You should get a green signal under Budget check results which means the purchase is within budgeted funds.
Before confirming purchase order, you can see the purchase order total under budget reservations for encumbrances screen. Once the purchase order is confirmed and invoiced you can see the amount under actual expenditure.
I hope this will help you understand how budgeting uses main account and financial dimensions to validate available funds for purchases in purchase orders and will help you when configuring budgeting for purchase orders for the first time!